Keystone XL Pipeline May Raise Midwest Gasoline Prices

A Consumer Watchdog report suggests completion of the contentious Keystone Pipeline would actually raise gasoline prices in the Midwest. In fact, the report finds drivers in the Midwest could pay up to 20-40 cents more per gallon for gasoline than they do today. The Midwest imports over half the oil it refines from Canada, and as Canada eyes an export avenue leading straight to the Gulf of Mexico, experts fear the price of Canadian crude will tie itself to global markets, potentially raising the price by $30.00 per barrel. Much of the oil currently sent to the Midwest from Canada would bypass Midwest refineries altogether on it's way to the global scene.

"Any reduction of deliveries to Midwest refineries would crimp gasoline supply, further driving up pump prices, and Keystone XL's backers want to move cheap oil out of the Midwest," said report author Judy Dugan. "Many major Midwest refineries have also made expensive changes to maximize their use of the tar sands oil and could not operate as efficiently using different grades of oil from other sources."

This comes as demand for gasoline lags in the U.S. due to increased fuel efficiency in U.S. automobiles and ethanol blending. But as China's middle class continues to swell, more and more of those citizens will purchase cars, creating a seller's market for international crude.

"If TransCanada’s Keystone XL pipeline to the Gulf Coast were approved, that would be “an important step” to connect Alberta to international markets," said Ken Hughes, Alberta’s energy minister. “[I]t is a strategic imperative, it is in Alberta’s interest, in Canada’s interest, that we get access to tidewater... to diversify away from the single continental market and be part of the global market.”

Supporters of the pipeline point to job creation as having a positive impact on U.S. unemployment, but the jobs created during the construction phase would dry up upon the project's completion. So while drillers in Alberta and refiners on the Gulf Coast stand to make a tidy profit from the Keystone Pipeline, consumers on the ground between the two would have to pay more for gasoline causing some to speculate the Keystone may not be all its cracked up to be.